The agency has also reaffirmed the rating of commercial paper of the company as CARE A1+.

CARE Ratings said that the revision in the ratings assigned to the bank facilities and debt instruments of Five-Star Business Finance (Five-Star) factors in the improvement in the scale of operations over the last two fiscals ended 31 March 2023, improvement in capitalisation levels with net worth base of Rs 4,285 crore as on 31 March 2023, and continuation of healthy profitability indicators while maintaining the asset quality.

The scale of operations improved with gross loan portfolio growing from Rs 5,067 crore as on 31 March 2022 to Rs 6,915 crore as on 31 March 2023.

The ratings continue to factor in the long track record of operations of the company in the lending business, its strong capitalisation levels, healthy profitability and well-defined credit policy.

Gross non-performing asset (GNPA) and net NPA (NNPA) stood at 1.36% and 0.69%, respectively, as on 31 March 2023.

The ratings are, however, constrained by the moderate seasoning of its loan portfolio, moderate asset quality parameters characterised by higher delinquencies in softer buckets notwithstanding the improvement witnessed in FY23, concentration of its loan portfolio in terms of geography, wherein, diversification is under progress; and the inherent risks associated with its borrower profile, mostly being self-employed in the informal segment.

Five-Star Business Finance is a non-deposit taking non-banking finance company (NBFC), registered with the Reserve Bank of India (RBI). The company lends small business loans for commencement of new businesses / improvement of their existing businesses, primarily towards the service sector; it also lends small housing loans which are given for construction, takeover, home repairs and improvements, etc. to salaried and self-employed customers; the company also lends mortgage loans which are given to meet their personal needs.

The company reported 43.3% jump in consolidated net profit of Rs 168.88 crore on 34.3% rise in total income to Rs 439.29 crore in Q4 FY23 over Q4 FY22.

The scrip declined 3.11% to currently trade at Rs 580.90 on the BSE.